TAMPA, December 18, 2013 – There has already been a lot said about Pope Francis’ EVANGELII GAUDIUM, in which he is critical of free markets. Reactions by Christian proponents of capitalism have ranged from respectful disagreement to full-on denial that he was critical of the market at all.

The latter group is not facing reality. While having since clarified that he is not Marxist, the pope clearly rejected the laissez faire approach to the market in favor of the highly regulated, redistributionist model promoted by the left. His offering is chock full of the usual sophisms leftists use to justify overriding freedom of choice in exchanges of property.

There is no need to address each of the pope’s arguments against free markets from a purely economic perspective. Tom Woods has already done this thoroughly during his December 6 episode of the Tom Woods Show, “Pope Francis on Capitalism.”

What is more surprising than the pope’s leftist economic ideas is his ability to ignore the overtly pro-capitalist themes in the gospels themselves. Jesus’ teaching consistently holds capitalists up as heroes. He never once even hints that the government should direct economic affairs.

The misconception that Jesus’ message is anti-capitalist probably stems from the same confusion that pervades all leftist thinking: the inability to distinguish voluntary from coerced human action. Jesus often exhorts his followers to voluntarily give to the poor. Nowhere in the gospels does he suggest that the Romans or the vassal Jewish government should be empowered to tax the wealthy to provide for the poor.

Tax collectors are de facto sinners, remember?

Jesus also warns against the temptations that great wealth may expose one to. Being consumed with accumulating wealth to the exclusion of all other concerns leaves no room for devotion to God or charity to one’s fellow man. This is summed up in Luke 16:13 when Jesus says,

“No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other. You cannot serve both God and money.”

Again, Jesus charges his followers to manage their own passion for wealth. There is no suggestion that the government should be involved.

Jesus doesn’t expound on political economy because, as he told Pilate, “my kingdom is not of this world.” (John 18:36). However, his parables have consistently pro-capitalist themes.

In the parable of the bags of gold (Matthew 25: 14-30), the servants who choose to be capitalists with the master’s money are richly rewarded upon the master’s return. The servant who chose not to be a capitalist is not only not rewarded, he is “cast into the outer darkness, where there will be weeping and gnashing of teeth!”

Certainly, the story is symbolic. The money in the story represents the abilities given to each individual by God. But even on that level the story does not support the anti-capitalists. First, the master, the ultimate capitalist in the parable, actually represents God. Certainly, Jesus would have found another way to make his point if capitalists were de facto sinners (like tax collectors).

Notice also that the servant who chooses not to invest the master’s money is the one given the least. Symbolically, he represents the person who has the least natural gifts or who is born to disadvantage. Does Jesus suggest that the other two servants should be taxed to help him? No. The most disadvantaged servant is expected to do the best with what he has. He isn’t punished because he achieves less. He is punished because he fails to try.

In two other parables, Jesus represents God as the owner of a vineyard. In Matthew 20: 1-16, he makes the point that it is never too late for salvation and that a repentant man can claim the same salvation as one who has been devout all of his life. He represents salvation as wages paid to laborers. When a laborer who worked longer complains that he is paid no more than one who only worked an hour, the master replies,

“Friend, I do thee no wrong: didst not thou agree with me for a penny? Take that thine is, and go thy way: I will give unto this last, even as unto thee.”

Again, the message is spiritual, but Jesus uses the very libertarian, capitalist idea that no one is entitled to any more wages than both parties voluntarily agree to.

God is again depicted as the owner of a vineyard in Matthew 21: 33-41. In this parable, the vineyard owner is even more overtly capitalist. Verse 33 in particular highlights that it is the previous work of the owner in planting the vineyard, hedging around it, and building a tower that makes the land productive before it is ever rented out to the husbandmen.

In other words, the capitalist has sacrificed his own consumption in the present to invest in land and capital goods to improve the productivity of the land. This has created an opportunity for the husbandmen to be more productive by working on the owner’s land than they would be on their own, without the land or the capital goods the owner has provided.

The owner then enters a voluntary agreement with the husbandmen whereby each party keeps part of what is produced. Both owner and husbandmen benefit from the agreement. The owner is entitled to the profits because he is the one who created the opportunity by sacrificing his own consumption in the past.

The husbandmen are evil specifically because they act like Marxists and renege on the agreement. They kill the owner’s agents and even his son, hoping to seize all of the wealth for themselves.

In verse 41, Jesus teaches that the owner will destroy the Marxists and rent the land to other husbandmen who will make him profits. The right of the owner to profits is affirmed, the idea that the workers are being exploited or should be able to take more than the owner has agreed to pay them is completely absent.

Nowhere in any of these parables are socialist ideas advanced. On the contrary, God is consistently represented as a capitalist and his children judged by how profitable they are to Him.

While the purpose of the parables is to teach a spiritual lesson, these are not the literary tools that an anti-capitalist author would employ. Jesus’ pro-capitalist bias couldn’t hit one over the head any harder, prompting the question:

>Most Americans have seen the hilarious skit on Saturday Night Live, where the CEO’s of the Big Three automakers return to Congress with the “turnaround plan” demanded of them as a condition of receiving (stolen) bailout money. In the skit, the CEO’s drive cars manufactured by their respective companies from Detroit to Washington in order to make amends for flying corporate jets en route to their first appeal for our money. Of course, all three cars break down on the way, making the CEO’s late for their appointment with the (looting) Congressmen. The punch line of the skit is that the only plan that the automakers have come up with is to return to Congress every six weeks to ask for more money. To top it off, the GM CEO promises that by the time that they are ready to accept the December payment – provided that car sales rebound – they would actually need even more money.

It is sometimes said that life imitates art. As funny as the Saturday Night Live skit was, real life proved even funnier. The CEO’s did manage to marshal the resources of their Fortune 500 companies (referencing the 2006 list) and come up with three Detroit-manufactured vehicles that could make it to D.C. However, as in the comedy, the CEO’s show up at Congress three weeks after asking for $25 billion and actually ask for more! Rather than outrage, Americans should really take the opportunity to find some humor in this. As the last vestiges of our Republic are destroyed, one can either laugh or cry. Let’s recognize this ridiculous exercise for what it is – a farce – and have ourselves a good, hearty laugh. We deserve it. Then, let’s stop laughing and turn our attention to the real villains in this immorality play: the United States Congress.

As tempting as it is to focus our attention on the pompous CEO’s of these horribly run companies, let’s not forget why they became so horribly run. It seems to be routinely forgotten that it was Congress that created the labor union problem, with its National Labor Relations Act of 1935 and subsequent violations of property rights. This is why the American auto companies can’t afford to compete. It is also forgotten that Congress created Fannie Mae/Freddie Mac and the Federal Reserve (the three entities entirely responsible for the housing bubble), Medicare and Medicaid (the programs entirely responsible for the both the bubble-prices of healthcare and the lion’s share of our $50 trillion in unfunded entitlement liabilities), the Department of Education (the agency entirely responsible for the next bubble – tuition prices), and every other economic problem that the United States faces. It is no less than tragic that Americans still have not figured out that, left to themselves, with a government limited to enforcing contracts and protecting them against violence, they would trade freely with each other indefinitely to their mutual benefit. Instead, Americans still look to this body of criminals to SOLVE problems that said criminals created. How are they continually fooled?

There are a number of answers to that question, but there is one strategy employed by our ruling class that is particularly frustrating. Students of philosophy may call it the Hegelian Dialectic, while political strategists may call it “framing the debate.” For us plain folks, you might just call it the “heads I win tails you lose” strategy. Every time that Congress wishes to commit some new crime, they present it with a ready-made debate, eagerly facilitated by our so-called journalists. In each case, the issue is presented as if there are only two alternatives, both of which advance government’s purpose to our detriment. Any alternatives beneficial to the people are excluded entirely. It’s the oldest manipulation trick in the book, not much more sophisticated than the old shell game where the pea actually isn’t under any of the shells. Unfortunately, we fall for it hook, line, and sinker, every single time.

This latest farce with the auto companies provides a good example, although there are hundreds (maybe thousands) more. When the idea of stealing our money to give to the failing automakers first came up, there was immediately “fierce debate” in the media about whether the automakers “deserved” the money. Some argued that it was the companies’ own fault that they were in the shape that they were in. Others argued that even if given the money, the automakers would still eventually fail. Congress pompously demanded a turnaround plan from the automakers as a condition of their receiving the money. The media provided (and is still providing) the façade of spirited debate about all of these straw man issues. Every angle to come at this problem is argued, except one: Does Congress have the RIGHT to take our money and give it to somebody else?

Once the deafening silence on this issue is acknowledged, the underlying assumption behind all of the rest of the arguments becomes clear. We no longer have any individual rights. In debating whether or not the bailout money would keep the companies from failing, the obvious assumption is that if the bailout would save the companies, then Congress has the right to forcibly steal our money to save them. In debating whether or not the companies themselves had caused their own demise, you must assume that if they did not, then Congress has the right to steal our money to help them. When demanding that the automakers come up with a turnaround plan to ensure that they do not need taxpayer money again in the future, Congress assumes that they have the right to steal our money as long as the automakers present a reasonable plan.

Not one journalist, not one talk show host, not one panelist – no one anywhere – no matter how liberal, conservative, or even libertarian they claim to be, has made the argument that Congress DOES NOT HAVE THE RIGHT to forcibly take money from one person and give it to another. This argument has been excluded from all debate.

There is a very good reason for this. It is that there is no reasonable argument that can be made on these grounds justifying this theft of our property. The Declaration of Independence tells us that governments are instituted to secure our rights. The Declaration also says that those rights are unalienable, meaning that no government – not even a democratically elected government – can take them away. No majority can vote them away. Foremost among these rights is our unalienable right to the fruits of our labor – our property. THIS was the right that the American Revolution was fought over. Read your history. King George wasn’t denying the colonists free speech, or freedom of the press. The colonists didn’t tar and feather censors. They tarred and feathered TAX COLLECTORS. As I’ve said before, it is your property that tyrants covet, not your right to free speech or freedom of religion. This hasn’t changed in two hundred years, nor will it ever change. Government’s job is to protect our property from theft by other people. There is no circumstance that justifies them committing this crime rather than defending us against it.

Therefore, by stealing our money – for any reason – Congress is contradicting the sole reason for its existence. It doesn’t matter if Congress thinks its actions will save jobs (they won’t), if their actions will save the economy (they won’t), or even if they believe the majority of Americans support their bailout. Even if every American citizen alive save ONE was in favor of giving the auto companies this money, Congress WOULD NOT HAVE A RIGHT to give it. To do so is incompatible with liberty.

Seen in this light, it is obvious why it is imperative that the subject of rights does not come up in any discussion of government bailouts. At all costs, Americans must be distracted away from their rights and lured into arguing about something else. Thus, we argue about CEO bonuses, private jets, energy efficient vehicles (and why Detroit doesn’t make them), and a long list of other unimportant details, while ignoring the one and only issue that matters: that this money is the property of each individual American and that government has no right, under any circumstances, to take it from us. Period.

The automaker bailouts are not unique in this regard. This same parlor trick was played on us with the bailouts of the financial companies. Would the executives keep their golden parachutes? If not, then Congress had the right to steal our money. Would the financial system collapse if Congress did not act? If so, then Congress had the right to steal our money. Would 401K’s and other retirement accounts be decimated without the bailout? If so, then Congress had the right to steal our money (did you notice that they were decimated anyway?).

Over many decades, government has employed this simple subterfuge to bait us into abandoning our impregnable position – our rights – and dupe us into arguing the practical merits (or lack thereof) of their crimes. By taking the bait, we disguise the crimes of our government as ineptitude, and relegate ourselves to complaining about poor results rather than recognizing these usurpations for the crimes that they are.

When the banking bailout was proposed, we objected. For one, brief, shining moment, we were Americans again. We told our representatives that they were NOT to take this money. For one glorious day, our government blinked. Then, they told us that some unimaginable doom awaited us if we did not surrender our property to them. We believed them. They told us that our retirement accounts would be devastated if we did not allow them to violate our rights, so we let them take our money. Our retirement accounts were devastated anyway, and we deserved it. By surrendering our own rights, we violated those of our neighbors. The money we let them take was not theirs OR ours to give.

We have another chance. We can call them again and order them not to give this money to the automakers. Yes, I said ORDER them. Rights are not something that you request of your government. They are something that you DEMAND be respected. Our government is about to once again violate our unalienable right to the fruits of our labor. We must order them not to do so. Do not let them derail you with spurious arguments about what might happen if they don’t steal your money. Stick to your guns and keep bringing the argument back to the only issue that matters: this money belongs to you and they don’t have the right to take it. Make no threats of violence or harassment, but accept no compromise or offer to “agree to disagree” either. Hold their feet to the fire and remind them that this government is YOUR servant. You will be surprised how much power you actually wield.

>There is one positive consequence of the economic collapse that is occurring, and the futile attempt by the government to stop it with money stolen from its constituents: the American public has woken up. Despite the best efforts of the major media outlets to spin this the way the government would like, it is apparent that mainstream America is mighty angry that they are being fleeced to prop up the financial system. I hope that anger does not fade with the passage of time – at least not until after November 4th. While wholesale changes are unlikely, it would be nice to see a few incumbents packing after this election and replaced by non-Republicrats. It would be an encouraging sign of things to come.

However, as good as it is to finally see some outrage over the destruction of our Republic, there is still a long way to go. Listening closely to the cries of anger, it is apparent that the majority of Americans still haven’t found their way to actually demanding their freedom. While they are angry, it seems that government has successfully channeled their anger in the wrong direction. Generally, Americans are mad at Wall Street, and are blaming this crisis on “greed.” To the extent that they fault government, they are blaming the crisis on “not enough regulation on Wall Street” and even (ugh) “too much laissez faire capitalism.” This of course plays right into the government’s hands, because the answer to “too much laissez faire capitalism” is more government intervention into the marketplace – which was the REAL cause of this problem in the first place.

If anything, the number one clue that it was not free enterprise that caused this debacle is that the government says it was. By now, every American should know to listen carefully to everything that the Bush Administration says and assume that exactly the opposite is true. However, decades of conditioning to mistrust the free market is paying off for the government, at least for the time being. They have turned this into a class war, instead of an ideological one. They have Americans indiscriminately resenting the wealthy, whether they earned their money legitimately or not. They have Americans condemning corporations, whether they achieved their place in the market legitimately or not. While Americans are mad at their government, they have been convinced, for the moment, that government’s failure was not protecting the average American from the evils of capitalism.

Of course, the truth is that this crisis was a failure of socialism, not capitalism. It was the socialist idea that every American was entitled to a house, and that taxpayers must pay for them, that led to the creation of Fannie Mae and Freddie Mac. Those companies guaranteed mortgages to people that would not have received them in a free market. Only the ability of the government to forcibly collect taxes to back those mortgages allowed the lenders to offer them. If there was any doubt that the government was backing Fannie and Freddie with taxpayer money, that doubt was removed when the government took over the companies when their inevitable failure occurred.

Even with the GSE’s in place, it took another socialist institution, the Federal Reserve, to supply the imaginary money needed to lend to all of those “sub-prime” borrowers. Without the imaginary “liquidity” provided by the Fed, the loans could never have been made and the home prices could never have been bid up so far. The Fed merely blew up another bubble, as it has been doing since the day it opened its doors in 1913.

What these interventions into the marketplace do is create artificial demand. Everyone knows that an increase in demand, while supply remains equal (or when the increase in demand outpaces an increase in supply), results in an increase in price levels. However, demand is not merely the desire to purchase a product, but also the ability to do so. If demand were merely the desire to have something, there would be unlimited demand for all products and services, taking most of the challenge out of running a successful business! The Fed and Fannie Mae certainly didn’t increase the number of people who desired to have a house, but it dramatically increased their purchasing power. In fact, the combination of easy money and credit by the Fed and the incentive for lax lending standards represented a massive increase in demand over the entire housing market, with the predictable dramatic increase in home prices. None of this represents free market forces at work. It is textbook socialist central planning and wealth redistribution.

That brings us to the government “solution,” and what Americans should really be mad about. Our government is now going to forcibly extort trillions of dollars from us in a misguided attempt to maintain the artificial conditions it created in the market. It won’t work. They have tried it many times, and it has never worked. The artificial demand drove prices far above their natural level, and natural market forces are now pushing them back down. Borrowers were lent money that they were never going to be able to pay back. What is worse, a large percentage took the artificial equity caused by the rise in price of their homes in home equity loans and spent it. That money is gone, and the borrowers can’t pay it back. Government taking possession of the mortgages isn’t going to change that. Those borrowers are still going to default, and the home prices are eventually going to go where they naturally must go. Economic forces are like forces of nature. In the end they cannot be stopped.

This intervention is practically identical to the interventions attempted during the Roosevelt administration in the 1930’s, which turned a severe 2-year recession into a crushing, 10-year depression. This bailout will have devastatingly similar results. It doesn’t matter whether a CEO gets away with a $10 million dollar bonus or not. What matters is tens of millions of Americans unemployed for a very, very long time. THAT will be the result of government’s attempts to maintain the artificial conditions in the economy that GOVERNMENT created in the first place.

Since the Austrian economists predicted all of this, while the Keynesians did not, it might pay to listen to what the Austrians suggest as a solution to these government-created crises. While their first advice was always not to create the problems in the first place, they certainly were clear about what to do when the inevitable bubble bursts occurred. Not surprisingly, they advised us to do EXACTLY THE OPPOSITE of what the government proposes. The cure for the recession, according to the Austrians, was to EASE regulation on business, especially in the labor market, and allow the quickest, smoothest reallocation of resources (including human resources) that was possible. As government intervention had created the problem, more government intervention was not going to solve it. In fact, any intervention could only make it worse, no matter what form it took. That is because the wealth creating mechanism of capitalism depends upon the participants making their decisions voluntarily, and government intervention represents forcing people to make different choices. This is really what most Americans are demanding from their government right now – for government to force market participants to choose differently than they otherwise would. Be careful what you fight for, Mr. and Mrs. America, you will probably get even more than you asked for.

I do have hope, however. Sooner or later, Americans will figure this out. At least they’re screaming about something now, which is a lot better than the docile slumber they’ve exhibited over the past several decades as we’ve marched toward oblivion. The government would much rather have them keep on sleeping than to have to divert their anger towards scapegoats and imaginary boogeymen. They will succeed in doing just that this time, but their system is nearing its end. The inevitable economic debacle will occur, and hopefully that will be the final straw. Americans have put their faith in government control and central planning of their lives for almost a century, and it has consistently let them down. Perhaps this last calamity will finally make them see the socialist lie for what it is. Then, they will finally stop walking down the road to serfdom.

The historic rip-off of the American public that has just taken place met with little resistance from the victims. Lest any inconvenient contrarians or clear thinkers rise up from the masses, the Great Rip-off comes with a Great Lie to justify it. While there has never been a shortage of factions ready to decry the evils of capitalism, it is important during a heist of this proportion that EVERYONE get on board. Therefore, virtually every politician, including the Republican nominee for president, and the entire media are blaming the current meltdown as a failure of free market capitalism. This is government’s Great Lie.

A lie this enormous is necessary when you are stealing trillions of dollars from 300 million people who are watching your every move. To pull off a crime like that, you have to convince the victims you are really helping them out.

Despite decades of government intervention into the economy, including massive expansion of entitlements and regulation during the Bush administration, the American public seems to accept the narrative characterizing the past decade as “an experiment” with laissez faire capitalism. House majority leader Steny Hoyer told RTTNews,

“With inflation, everybody who had any investment has lost money, 401(k) savings plans, pensions, they’ve lost money,” he said. “That’s a stark failure of the economy and this administration’s laissez faire, take the referee off the field, let anyone do whatever they want to do and everything will be fine.”[1]

“The top Senate Democrat, Majority Leader Harry Reid, blamed the crisis on Bush’s laissez-faire policies, then called on the president to better explain why such a sweeping program was needed as the country prepared for a presidential vote in less than six weeks’ time.”[2]

While such rhetoric might be expected from Democratic Party leaders, especially during an election year, there is no substantive rebuttal from the other side. Quite the contrary, as John McCain’s interview with the New York Times makes clear.

“I’m a Teddy Roosevelt Republican. Teddy Roosevelt was the first one that took on the big trusts, first time we began to have regulatory agencies. He said, unfettered capitalism leads to corruption. I’ve always agreed with that.”[3]

If the Great Lie is this crisis representing a failure of capitalism, there are a lot of little lies that help support it. Congressman Hoyer’s characterization of laissez faire capitalism as letting “anyone do whatever they want to do and everything will be fine” is just such a supporting lie. It is a variation of the attack on freedom itself as if it places no limit on anyone’s actions. In both cases, the limit is harming another individual.

Laissez faire capitalism does not allow contracts to be broken, nor does it allow force or fraud to be initiated in forming them. While these limits are vital to laissez faire capitalism, Congressman Hoyer would have us believe otherwise. Take note of Hoyer’s choice of words. Even in the absence of any harm to others, Hoyer has an aversion to people doing “whatever they want to do.” He personifies statism.

The real substance of the Great Lie is the characterization of the American economy in any recent decade as “capitalism.” It isn’t. Even our government and media establishments acknowledge we have a “mixed economy,” supposedly combining the benefits of free market capitalism with socialist central planning and redistribution. The Lie says that it has been too much “unfettered capitalism” that has caused our current crisis, rather than too much socialist central planning. How can we know which is to blame?

It’s a false dilemma. In reality, there is no such thing as a mixed economy.” We are witnessing the inevitable failure of that idea. It is doomed from the start, because the moment any central planning is introduced, capitalism ceases to exist. Once government intervention is introduced anywhere, it must eventually be introduced everywhere, resulting in all of the failures of socialism throughout history.

In truth, there is no “capitalism” at all in our mixed economy.

The proof? Let us consider what capitalism is, and whether its definition applies to the U.S. economy. Merriam-Webster defines capitalism as,

“an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.”[4]

Of the three elements in this dictionary definition, private ownership of capital, voluntary exchange, and competition, it is the second that is fundamental to the other two. Why? First, as long as there is voluntary exchange of property, there will be private ownership of capital. There is no way for government to acquire property in a “voluntary exchange.” Even a revenue generating enterprise started by government has to be funded into existence by tax money, and taxes are collected under the threat of force. Therefore, in a system where all of the transactions are voluntary, all property, including capital goods, remain privately owned.

Second, when all transactions are voluntary, most buyers and sellers are going to try to act in their best interests. Sellers will constantly try to convince buyers to purchase their products or services, rather than those of others. Likewise, buyers are going to try to find the best products at the lowest prices, motivating sellers to maximize their quality and minimize their price so that their products will be chosen over those of other sellers. Therefore, voluntary exchange naturally results in competition. It is competition that motivates innovation and improvement in efficiencies, and lowers the cost of production. Thus, it is free choice that ultimately drives the wealth-creating mechanism of capitalism. Without free choice, there is no capitalism.

Investments in the U.S. economy can hardly be described as being determined by private decision when government actively steers the investment decisions of capitalists. It does so either by outright subsidization of investments it favors, or by providing tax breaks to companies that make those investments. It is ironic that government often characterizes this second method as positive action to stimulate growth. After taxing all business activity to the brink of insolvency, it then gives back a small portion of the booty to investors willing to do its bidding. By doing so it wins political support, and at the same time distorts the economy, creating new problems to solve with future interventions. Thus, the government protects the job security of its incumbents and creates the need for more government all in one fell swoop.

Neither are prices really determined by competition in a free market in the U.S. economy. Prices are routinely fixed by government intervention, such as the prices of agricultural produce by government farm subsidies or the price of healthcare by massive government subsidization through entitlement programs. The price of labor is distorted by minimum wages and massive regulation that makes employing people infinitely more expensive than it otherwise would be. Interest rates, or the price of borrowing money, are set by the central bank, which is the most harmful price fixing of all (we will look more closely at this momentarily). While some prices are set by market forces, a large percentage is affected in one way or another by government.

Similarly, the distribution of goods in the U.S. is sometimes determined by competition in a free market, but that is only after government has taken over 12 percent of all goods and services produced in the economy and redistributed them through massive welfare programs, destroying the possibility of any real, voluntary savings. For those goods that are distributed in part as a result of competition, it can hardly be described as occurring in a “free market” when employers cannot really decide for themselves who to hire, employees cannot accept any wage they wish to, massive regulation protects large companies from smaller competitors, and even imports and exports are subject to over 20,000 pages of regulation in “free trade agreements” like NAFTA.

Most harmful of all is the supreme intervention into the economy by the central bank, which not only artificially sets the interest rates that ultimately determine the cost of investment, but artificially controls the volume and purchasing power of the money supply itself. While truly free markets are characterized by a steady decrease in general price levels over time, the artificial inflation of the currency by the central bank reverses this process. While the business cycle is relatively mild in a free market, the bubble-bust cycle caused by central banking ranges from painful to castastrophic.

Thus, the economic problems facing America today are not caused by capitalism, because it doesn’t really exist in the U.S. economy. Capitalism results in a natural, economic equilibrium. Central planning disrupts this equilibrium. In fact, not only are our economic problems caused exclusively by government intervention into the marketplace, rather than capitalism, these problems are the INEVITABLE RESULT of government intervention.

Why? Central planning, by definition, precludes free choice, and therefore capitalism, but does not change human nature. Human beings will still attempt to make choices in their rational self interest. This is one of the reasons for all of the unforeseen consequences of central economic planning. When government forces buyers and sellers to make choices other than those they would make otherwise, those economic agents seek another way to pursue their rational self interest. As these alternative decisions naturally run counter to the government’s desired result, more force is needed to prohibit those choices by economic agents, or to force other economic agents to address the consequences of its intervention. That in turn causes further unforeseen results, requiring further use of force by government. Once government intervenes in the market, it is inevitable that it will have to continue to intervene until it controls every aspect of economic activity. This has been the trend in the U.S. economy for the past 100 years.

In addition, government intervention cannot change economic realities, such as the cost of production. Only innovation can do that, and innovation cannot be created by government decree. Therefore, when government intervenes into the economy, all of the economic forces that were acting upon the market before the intervention continue to act upon it. For example, as Von Mises pointed out, if the government sets a price ceiling for milk, the smaller, marginal producers of milk can no longer afford to continue producing it, and may decide to produce cheese or butter instead. By intending to make milk more available to the poor, government has actually caused a decrease in supply. It then has to fix the prices of factors of production that are necessary to produce milk, causing the same pressure on marginal suppliers in that market and a decrease in supply of those factors of production. The cycle continues to repeat until the government either ceases to intervene in the market completely or nationalizes the entire industry.[5] At that point, even private ownership of capital no longer exists.

Thus, there are some conclusions that can be drawn. One is that there is really no such thing as a “mixed economy.” Economic forces do not allow it. Allowing some economic agents to choose freely in some circumstances does not produce the same results as when all economic agents are allowed to choose freely in all circumstances. Economic events are too interrelated. If the government subsidizes ethanol production, it decreases the supply of corn for food, and drives up food prices. When it imposes a minimum wage, it causes workers that would otherwise have jobs to be unemployed. That in turn decreases supply and drives up the prices of consumer goods. Economic agents making free choices under these circumstances necessarily choose differently than they would if conditions were different. There is no such thing as controlling part of a free market. Therefore, our mixed economy really is no such thing. If the choices of all agents are not free, there is no capitalism. The economy that results simply doesn’t fit the definition.

Another conclusion that can be drawn is that attempting to achieve a mixed economy inevitably leads to complete socialism. As we have seen, the first government intervention into the economy necessitates further interventions, which in turn necessitate further interventions still. The cycle continues until government controls all of the distribution and eventually must take control of all of the capital, as there are no longer private firms that are willing or even able to continue producing under the distorted economic conditions. For those who would argue on behalf of complete control of capital and distribution by government, the plain facts of history are against them. Socialism in its purest form has consistently resulted in mass shortages, famine, starvation, and eventual death for tens of millions of people.

The solution to all of our problems is simple: FREEDOM. While that may sound like a bland platitude, it is nevertheless 100% true, for all issues, without compromise. As Thomas Jefferson said,

“Our legislators are not sufficiently apprised of the rightful limits of their powers; that their true office is to declare and enforce only our natural rights and duties, and to take none of them from us. No man has a natural right to commit aggression on the equal rights of another; and this is all from which the laws ought to restrain him.”[6]

This “Non-Aggression Principle” is often associated strictly with libertarians or objectivists, but as you can see it did not originate with either. It was a central tenet of the founding fathers, because this principle is THE VERY DEFINITION OF FREEDOM ITSELF.

While it is possible to garner wide support for this principle on many social issues, such as gay marriage, somehow the great majority of people cannot seem to apply it to economics. Despite the fact that economic freedom is the most vital to our survival, as it is the means of sustaining our existence, there are even some libertarians that would apply different rules to economic policy than to the other “civil liberties.” It is vital to recognize that not only is this principle equally applicable to economics, BUT THAT IT IS IN REGARD TO ECONOMIC POLICY THAT IT IS MOST IMPORTANT. It is the only principle that prohibits government intervention and central planning. It is the principle upon which a truly free market is built.

The move toward a truly free market cannot occur without painful side effects. When resources are misallocated on a mass scale, especially human resources, reallocating them means losses, unemployment, and economic suffering in the short term. This would have been the result of government choosing not to intervene in the market to bail out Fannie, Freddie, Bear Stearns, and AIG, to buy up the bad debt of other debt holders, and to guaranty the assets in the money market. However, that economic suffering has not been avoided by government intervention, but merely postponed. In fact, the longer that government intervention succeeds in postponing the inevitable reallocation that must occur, the more resources become misallocated and the more painful the correction will be. At present, we are facing the largest correction in economic history, and government has postponed it longer than a correction has ever been postponed before. Make no mistake. The reallocation is inevitable, and we will experience it either voluntarily or involuntarily.

However, before considering how to survive the painful consequences of this correction, we must first decide that a free market is what we want. This will never happen until the vast majority of Americans recognize the Great Lie for what it is. Doing so immediately might bring political pressure to bear on our government to reverse its present policy while the Great Rip-off can still be undone. This is unlikely to happen anytime soon. It is much more likely that the trend toward socialism will continue until it reaches the conclusion that socialism has reached throughout history: economic collapse. We are closer to that end than most people think.

At that point, Americans will have a choice. They can continue to believe the Great Lie and allow government to try to solve the problem, or they can choose to see the truth and demand their freedom. Historically, the government solution to an economic collapse has been totalitarianism. The fact that the least economically free nations of history were also the most totalitarian is no coincidence. In order to avoid this, Americans must cease to apply special rules to economics and realize that there is no freedom at all without economic freedom. The economics of freedom is laissez faire capitalism. The Great Lie says that laissez faire capitalism doesn’t work. This is merely the application to economics of an even greater lie – government’s most insidious, Greatest Lie of All: that freedom itself doesn’t work. When Americans finally recognize and reject this fallacy, they will once again find themselves on the road to prosperity and peace.

[1] House Majority Leader Slams Bush For Economic Policies RTTNews[2] “Top Democrats skeptical of Bush bailout package” AFP September 20, 2008[3] Transcript of an interview with Senator John McCain by John Harwood of The New York Times and CNBC, as provided by CNBC and published in the New York Times on September 21, 2008[4] http://www.merriam-webster.com/dictionary/capitalism[5] Von Mises, Ludwig Middle-of-the-Road Policy Leads to Socialism from Two Essays by Ludwig von Mises (Auburn, Ala.: The Mises Institute, 1991, pp. 42-68). http://mises.org/midroad.asp[6] Jefferson, Thomas Letter to Francis Walker Gilmer June 7, 1816

“Among the natural rights of the Colonists are these: First, a right to life; Secondly, to liberty; Thirdly, to property; together with the right to support and defend them in the best manner they can. These are evident branches of, rather than deductions from, the duty of self-preservation, commonly called the first law of nature.”

Although the United States has the reputation as the most capitalist nation on earth, she is fast moving away from the principles of laissez faire capitalism, while formerly communist countries like China and Russia are moving closer to those principles. This is not surprising, given the 20th century history of China and Russia. Each rejected capitalism for communism, and each have already seen where the end of that road leads: poverty, starvation, mass murder, and totalitarianism. Russia and China have already had to face the fact that communism doesn’t work and reject it for a more free market economy, or face collapse and annihilation. To the extent that they have become freer, they have become more prosperous. To the extent that they still cling to the old ideals of communism or socialism, their progress is retarded.

The United States has not yet faced economic calamity on the scale of that faced by Russia or China, and that is due to the far lesser degree to which the United States has embraced socialism. Along with the western European countries that stood against communism throughout most of the last century, the United States has chosen the path of the “mixed economy,” attempting to mix elements of free market capitalism and socialism in an effort to more “equally” distribute the fruits of production, and to build a “social safety net” for those who at some point in their lives are unable to produce enough to meet their own needs.

However, if there is one common characteristic to the mixed economies of the west during the past century, it is economic decline. Certainly, there are temporary recoveries here and there by one country in relation to the others, but the overall quality of life for people in the mixed economies has been diminishing almost from the moment that they have decided to try to mix socialism with capitalism. Most people do not see the European Union for what it is: a temporary solution for a group of countries that became unable to sustain themselves economically on their own. This was not a result of new competition from emerging nations as much as the natural result of plundering the more productive members of society to support the less productive. Combining their economies under one currency and centrally planned economy merely allows the European Union to pool the productive capabilities of all of their societies, in order to create a larger surplus to plunder. However, the same forces that caused those nations to fail economically on their own will eventually overcome the group of nations together, as will be the result for the United States.

The United States has been able to avoid the economic collapses of the European economies largely due to the fact that it has “mixed” its economy with less outright socialism, at least in decades past. However, the compromises it did make with socialism were the cracks in America’s economic foundation, and as it has moved farther and farther toward socialism in recent decades, those cracks have begun to widen. Now America sits on the edge of the same economic precipice that overcame the economies of Europe. Those realities will become apparent within the next presidential term, possibly under dire circumstances.

Why doesn’t a mixed economy work? The answer is that even a mixed economy violates a fundamental moral and economic principle: property rights. While some might argue that a mixed economy attempts to combine a moral solution (economic equality) with a pragmatic one (productivity), a clear understanding of property rights shatters this fallacy. Violating property rights even for the purposes of achieving what some might regard as more “just” distribution of wealth is both ineffective AND immoral. If there is some transcendent justice in the world, it is that the practice of violating property rights is never successful in creating a sustainable economy.

It takes no monumental exercise of reasoning to see why capitalism has produced such enormous wealth so quickly wherever it has been practiced. In a complex society of millions of people, with each person making the most advantageous exchanges of property that they can, and with an incentive to consume less than they produce in order to realize savings for either capital or future retirement, productivity soars. Productivity in excess of what is consumed produces savings, or capital, which increases the means of production and results in even greater productivity. This was the system that made the United States the wealthiest nation on earth in one short century.

Thus, in economic terms, we have two identifiable extremes. Freedom is defined by the universal recognition of an unalienable right to the fruits of your labor. In contrast, slavery is the complete absence of ownership of the fruits of your labor. More than anything else, it is where a society falls between these two extremes that determines whether or not a society is free. The United States was once as close to the freedom extreme as may be possible for a society of flawed human beings.

Socialism does not recognize a person’s ownership over the fruits of his labor, nor his right to freely exchange those fruits with others. In a socialist system, the fruits of labor are distributed by the state as the state deems fit, not by the free exchanges between their citizens. Thus, their citizens do not enjoy the most basic right that makes them free, nor does the economy benefit from the fundamental building block of productivity.

Even in a mixed economy, where citizens retain some property rights, some of the fruits of their labor are still taken by government and redistributed without their consent. In the United States, this occurs through massive social programs like Medicare, Medicaid, Social Security, and Public Welfare. While Social Security and Medicare are funded partially by the contributions of the beneficiaries, there is no effective controlling mechanism to distribute benefits proportionately according to contribution, although Social Security has a crude methodology attempting to do so. More importantly, these programs violate the vital principle of consent. The participants in the programs do not participate voluntarily, but under the coercive power of government. Thus, ownership of the fruits of their labor is not respected in terms of the monies taken from them to fund the programs.

The violation of property rights does not stop with providing for the poor or elderly, but for corporate welfare as well. In an attempt to “manage the economy,” public funds are also used by the government to bail out failed corporations that are deemed “too big” or “too important” to be allowed to go bankrupt. This not only violates the rights of the people whose property is confiscated in order to underwrite these bailouts, but also causes distortions in the economy.Rather than some type of compromise between freedom and slavery, which sounds bad enough, the mixed economy makes a more fundamental break with the principles of liberty. In a mixed economy, the citizens no longer have an unalienable right to the fruits of their labor, or property rights, but rather have the privilege of keeping that property that the government does not choose to take. Changing property from a right to a privilege is a monumental change in the principles that a society is founded upon. It crosses the majority of the divide between freedom and slavery. The moral argument against socialism or even a mixed economy is that they both violate property rights: the most important, most basic right that people have.

It is also easy to see why even a mixed economy is not sustainable economically. As it violates those property rights on a regular basis, it is siphoning off the surplus productivity from those producing more than they consume and distributing those savings to those consuming more than they produce. Thus, savings and capital are diminished at first, and eventually destroyed when the incentive to save is eroded. In practical terms, the laborer of today no longer saves for his retirement, partly because he is unable to due to the sizeable portion of his property that is seized to pay the benefits of present beneficiaries, and partly because he knows (or at least believes) that future generations will pay those benefits for him.

One need look no further than the present state of the American economy to see this argument proven out. After decades of growth of socialist programs like Social Security and Medicare, the United States has gone from being the world’s largest creditor to the world’s largest debtor. Its people and its government are mired in debt, and its economy has a negative savings rate. No longer is the American worker the highest paid or most productive in the world. One by one, the United States has lost its dominance in almost every economic sector, no longer producing the majority of goods and services it consumes. While our politicians may try to lead us to believe that economic cycles “just happen,” a sober look at the departure we’ve made away from our founding principles reveal the true reason for our economic decline. The foundation of this departure has been our violation of property rights.

We are now at a crossroads. Socialism, even “diluted” in our mixed economy, has lead us to where it always leads: to the verge of economic collapse. During the next presidential term, the United States is going to face an economic crisis that will startle even the most disinterested and apathetic of its citizens. The question is not so much “what is to be done?” as it is “who will you believe?” Already, politicians and the media are framing the debate on the assumption that it was capitalism and too little regulation over “greedy speculators” that caused our problems. False prophets of freedom, like Lou Dobbs, are masquerading as champions of the people while emphatically calling for more government regulation, and not denouncing wealth redistribution, but merely criticizing the way the loot is split. A new edifice is being built in the capital of the empire of lies.

No matter who gets elected, no matter what policies are made, an economic crisis is coming, and it will be painful. The only way for America to recover from it will be to rebuild its awesome productive capacity that once made it the greatest, wealthiest nation on earth. That cannot be done without rejecting the socialism – even the mixed economy variety – that has ruined her. She must again be an example to the world that liberty and individual rights are the only sustainable economic and political system. It will not be easy for America to choose this path. The voices of liberty have grown few and those advocating socialism have the media, the politicians, and the guns. However, as difficult as it may now seem, we must convince the American people that this calamity was not a failure of capitalism, regardless of what they are told. Economic upheavals spawn revolutions. In Russia and Germany during the early 20th century, those revolutions ended badly. We must educate our neighbors so that we choose a wiser path. Make no mistake; the danger is real. Lies and ignorance in the midst of this crisis can enslave us for generations, but the truth can surely set us free.

[1] Samuel Adams The Rights of the Colonists (1772) The Report of the Committee of Correspondence to the Boston Town Meeting, Nov. 20, 1772 Old South Leaflets no. 173 (Boston: Directors of the Old South Work, 1906) 7: 417-428.